Wholesale and Networks. Alphonzo Samuels Chief Technology Officer
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1 2014 Wholesale and Networks Alphonzo Samuels Chief Technology Officer
2 Agenda 01 Landscape Service Challenges Network Transformation Transformation Programme review 05 Technology 06 Wholesale 2
3 LANDSCAPE 01
4 Competitive Landscape 01 The quality and reach of telecommunications infrastructure in South Africa has improved dramatically over the last decade. The most notable areas of improvement are: The number of undersea cables that have landed on our shores National and regional data backhaul networks being built out by Telkom and others Significant Metro and access fibre roll-out Satellite coverage covering the country and beyond; and Significant build out of mobile networks 4
5 National Transmission Network Coverage 01 Telkom s national fibre network Telkom has more than 147,000 km of fibre (largest footprint in SA critical to support a nationwide deployment) 16,588 Fibre Distribution Points already enabling more than 100,000 services 948,868 ADSL subscribers 5
6 National Mobile Network Coverage 01 Telkom mobile 3G coverage reaches approx. 55% of the population 2428 sites on air 1165 LTE sites on air 2426 WiFi access points 3G LTE 6
7 Global Reach Connecting Our Customers to the World 24/7 01 Submarine cables (3-2-3) 3 gateways out of the country (Yserfontein, Melkbosstrand, Mtunzini) 2 rings around Africa (WACS/EIG/EASSY and SAT#/SAFE/SMW3) 3 diverse routes (WACS and SAT2/EIG and EASSY/EIG or SMW3) Terrestrial fibre connects SADC countries International IPNet POP s (London, Amsterdam, NY, HK, Frankfurt) Our Global VPN extended coverage spans across 111 Countries and over 700 Cities globally Satellite services 3 major earth stations Covering Africa Submarine cables International IPNet Satellite Services 7
8 SERVICE CHALLENGES 02
9 Drivers of Fault Rate and Repeat Report Rate (RRR) 02 Cable Thefts Vandalism Poor Workmanship Seasonal Weather patterns Ageing Voice grade Network Internet Service Provider Customer CPE Fault Rate & Repeat Report Rate Network Performance Processes & Systems Customer communication Test systems Product definition Fault Diagnostics Fault Rate and Repeat Report Rate impacting factors are diverse, for each product/service type, each with its own unique set of circumstances and challenges 9
10 Where are the faults / costs in existing network? 02 No Fault Home Access Backhaul Core No fault found, Upfront clears, Right when tested Cu Cu Cable Fibre Optical Fibre Cable ME Legacy PSTN IPConnect or SAIX Softswitch IMS ISP 1 Fibre ISP 2 ISP 3 When we tested it, or arrived at the customer, the service was performing as required WWW 25% to 30% 10% to 15% 45% to 50% 5% to 10% 5% to 10% 10
11 VALUE CONCENTRATION AND GEOGRAPHIC CHALLENGES 02 Low income areas Low-mid income areas Mid income areas Mid-high income areas High income areas South Africa Johannesburg and Pretoria Lesotho Cape Town 2% of South Africa s area concentrates 50% of population and 77% of national income Mid and high income areas are highly concentrated in a few urban and suburban areas 59% of households represent 83% of total income 11
12 Vast geography and relatively dispersed customer base makes for a unique challenge 02 Area type Disposable income Broadband needs Target solution Urban corp. & business parks Very high High bandwidth requirements (> 100Mbps) FTTB & PON SMMEs, branch offices & Campus High High bandwidth requirements (> 100Mbps) SHDSL, VDSL & 2.6 GHz hotspots Gated comm & SOHO Medium High bandwidth requirements ( Mbps) PON & VDSL Urban suburban & SOHO Medium Medium bandwidth requirements (10-40 Mbps) ADSL2/2+ & VDSL Urban township Medium-low Low bandwidth requirements (4-10 Mbps) 3G/LTE in 2.1 GHz and 900 MHz Farms, rural bus. & game lodges High Low bandwidth requirements (4-10 Mbps) LTE in 800 MHz and satellite Rural settlements Low Very low bandwidth requirements (1-2 Mbps) LTE in 800 MHz and satellite Deep rural Very low Very low bandwidth requirements (less than 1 Mbps) Satellite 12
13 Value Concentration and Geographic Challenges: Spectrum in the 700/800 Mhz 02 The propagation characteristics of spectrum Relative CAPEX required for network infrastructure investment 850MHz 708MHz <700MHz 1,230% 2,100MHz 5,800MHz Cell radius (km) 675% 455% 328% Number base stations 100% 126% ~20 ~15 ~10 ~7 ~5 ~2 Source: BBC R&D UHF band (MHz) 13
14 NETWORK TRANSFORMATION July
15 Telkom's Transformation Programme A key enabler to drive Broadband expansion 03 Recap Telkom s transformation strategy Voice centric Significant portion of the revenue coming from voice (and declining) Limited broadband capabilities on the back of legacy technologies (e.g. copper based) Low economies of scale limiting potential growth and affordable services Manual driven processes (ultimately driving high cost to serve) Slow to market new lines and services Economically not sustainable Legacy technologies limit Telkom s abilities to offer advanced data services at affordable prices Data centric Revenue driven by data services (stabilizing revenue or growing) Future proof capabilities based on fibre technologies (e.g. FTTx) and mobile High economies of scale allowing high speed data intensive services at affordable prices Automated processes bringing efficiency and lower cost to serve Improved Speed to market & Enhanced services Focus on economically viable areas Strategy will enable ICT play through future proof more efficient technologies One Network, all IP 15
16 Strategic Considerations 03 Recap Obsolescence Revenue generation and protection Cost & Customer IT Voice Broadband & Data Consumer Business Wholesale Cost Customer Enhanced IT E10 EWSD ATM ADSL Diginet 60 : 40 revenue protection versus new revenue Utilities Centralised Control & configuration Combo ports Cost per bit Lower fault rate Higher speeds Reputation: Fixed/mobile differentiation Cost avoidance Product & services (rationalise legacy systems & applications) Enable the improvement of customer experience 16
17 Multi Service Access Node (MSAN) is the chosen solution to revamp the access network 03 MSAN solution The MSAN provides the ability to enable different service types, which target various segments from the same access node Four use cases differentiate four demand patterns International leading players best practices and industry trends have been used to benchmark the access solution MSAN specifications (nonexhaustive) MSAN enables a future-proof access network Addresses current and future demand requirements by being scalable and flexible Based on Next Generation Network technologies Aligned with international standards Specification based on evolving open standards, ensuring interoperability Upgradable to FTTx: Capability to support next generation xpon technology DSL standards Ethernet & Networking specifications Supports emerging voice protocols 17
18 xdsl speed is influenced by copper thickness and its length 03 Maximum attainable speed in copper networks Maximum attainable speed for DSL technology 1 (Mbps vs. meters) ,000 2,000 3,000 4,000 5,000 6,000 MAS (meters) ADSL (Mbps) ADSL2+ (Mbps) VDSL2 (Mbps) 580 m ,160 m ,320 m ,552 m ,480 m ,060 m ,640 m ,988 m ,568 m After 2.5 km all technologies deliver the same speed ADSL ADSL2+ VDSL2 The thickness of the copper cable determines the signal transmission loss per km, thus impacting on the maximum attainable speed for a given distance Note: 1 Considering a wire gauge of 22 AWG (loss of 8.62 db/km) Source: Speedguide.net 18
19 FTTx broadband architecture is our chosen path and best fit for SA Revamp Access: The Options 03 Topology Central office MSAN FTTC FTTx Outside plant Central office to remote Remote to customer premises Copper Fibre Technology ADSL ADSL2+ VDSL2 VDSL2 bonding vectoring Omega DSL B-PON G-PON Active Ethernet Maximum speed (Mbps) ,000 1,000 to 10,000 Current enablement Upgradable enablement Evolution of xdsl technologies will enable higher speeds in copper 19
20 Transformation Progress 03 IT Operations FTTH (>100 Mbps) Revamp of access FTTC (40 Mbps) Enhancement of aggregation Evolution of core Local exchange upgrade and Fibre capabilities set Increased aggregation capacity and better customer experience Wireless, Fixed-Wireless and Satellite access Access agnostic and Enabling Fixed-Mobile Convergence Building a Service Orientated Architecture (SOA) for NG product and services State of the art network operations centre Transmission network Evolved from Gbps to Tbps with resilience and manageability International connectivity World-wide reach with superb capacity and resilience 20
21 Current NGNEC rollout status 03 FTTC Active Ports = 574,288 FTTH/B Homes Passed = 1,733 I 1 I 2 I 3 Revamp access Enable differentiated broadband product FTTC Remote sites = 455 (239,152 ports) 139 Remote sites waiting cut-over = 66,813 ports 42 remotes sites in store (no power) FTTH/B 6 x TPoC sites for FTTH/B completed Homes passed 1,524 Homes connected 16 Downtime improvement Fault reduction Enhance aggregation Protect business data revenue Decommission legacy P&S New NG BRAS (BNGs) deployed Additional Metro Ethernet nodes have been deployed Identified buildings which has existing fibre or requiring fibre to be provided. Future Revaluate present technology & vendors of core IP & Transport networks Migrate voice Mitigate risks resulting from end-of-life equipment Central Offices = 51 (251,232 ports) One Central Office decommissioned 7 additional central offices deployed representing 54,958 ports 3 FTTH/B enabled C.O. Utility savings I 4 Evolve core I 5 Overhaul OSS/BSS I 6 Enable multi access technology Meet next generation customer management and multiservice control experience demands Enable innovation Enable new business models IMS phase 1 completed. IMS Phase 2 to commence Develop future plan for the convergence fixed and mobile plans Future Revaluate present technology & vendors of core IP & Transport networks Continual improvements in a phased approach based on services and efficiency introduced. 20 & 40 meg services Legacy Diginet (n * 64k) replacement with Ethernet being `developed FTTH/B products being developed New training systems 21
22 TRANSFORMATION PROGRAMME REVIEW FTTH / LTE MIX 04
23 Relative Network Transformation Investment sizing 04 Revamp of access Enhancement of aggregation IT Evolution of core The journey to a future-proof network is based on a comprehensive set of interventions. Investment in the revamp of access is the crucial last step and the most challenging 23
24 NGN and LTE are able to answer the growing demand for higher bandwidths of several applications 04 Basket of services per bandwidth (Mbps) VoIP Browsing OTT HD TV 2x HD TV 4k TV Access network capacity Mbps 20 Mbps 40 Mbps 100 Mbps ADSL 2+ VDSL 2 G-PON LTE Today s Home Future Homes 24
25 Review in progress to provide high speed Broadband access using LTE technology in/as fixed wireless solution 04 Illustrative VDSL FTTH LTE Network coverage 25
26 Installing fibre to the home 04 GROENKLOOF BROOKLYN HOUGHTON ESTATE PRETORIA MORNINGSIDE JOHANNESBURG BRYANSTON RIVER CLUB Target PLATTEKLOOF CAMPS BAY FORESHORE PLATTEKLOOF 2 PLATTEKLOOF 3 CAMPS BAY CLIFTON BAKOVEN DURBAN SANDHURST WESTCLIFF ROSEBANK WINSTON PARK EVERTON KLOOF CHILTERN HILLS CRAIGHALL CRAIGHALL PARK ILLOVO PARKTOWN NORTH HYDE PARK PARKHURST 23 suburbs covered by December ,000 homes passed by Mar 15 Current Status 1,733 Homes Passed DE WATERKANT CAPE TOWN BISHOPSCOURT RESERVOIR HILLS Telkom announced on 13 June 2014 plans to roll out FTTH connectivity to over twenty suburbs. Commercial launch of basic voice & broadband FTTH/B to enable the sale of up to 100Mbps resell DSL by October
27 LTE FTTH/B FTTC Copper Network Topology showing Copper, FTTC and FTTH/B Access 04 Filter Copper loop / sub-loop xdsl Modem Copper Cable Filter Exchange PSTN Softswitch IMS xdsl Modem Copper loop / sub-loop Remote MSAN Fiber Metro Ethernet BRAS/BNG IPConnect or SAIX TCNet VPN Splitter Fiber GPON/ Active Ethernet Node Content Network? IAD In door wiring ONT Fiber loop / sub-loop Access Network Aggregation & Core Network IAD ONT Fiber 3G / LTE base station 27
28 TECHNOLOGY July
29 IMS Enablement 05 GSM Access layer Satellite Transport layer IMS core layer LTE HSS SIP AS MRF PSTN PCRF CSCF MGCF PRI ADSL SIP Trunk MSAN 29
30 End-state Network Access Topology 05 Home Access Backhaul Core Cu Cable Legacy PSTN Softswitch IMS Cu Fibre IPConnect or SAIX Optical Fibre Cable ME Telkom Internet Fibre WWW Extend Ethernet / Metro Ethernet as close as possible to the customer, especially business customers 30
31 WHOLESALE 06
32 Principle provider of Wholesale Services 06 Strategy To become the Wholesale Provider of choice, a leader in Broadband and Connectivity Services - Your Partner in Business. Repositioning of Telkom Wholesale by: Secure long term agreements with key MCO's and OLO's Evaluate adjacent growth areas and define opportunities Advance Wholesale Sales and Business Development Capabilities 32
33 Successful wholesalers have managed to develop their non-voice revenue, both locally and internationally 06 1 Most of the wholesale revenue in mature markets is non-voice related 2 Global wholesale markets trends 3 FTTH better allows incumbents to defend their investment Fixed incumbents have an opportunity to enable digital players CDN strategies 4 Successful wholesalers have managed to extend their activities internationally 33
34 The current wholesale revenues in mature markets are mostly generated through non-voice products 06 Evolution of European incumbent wholesale revenue mix Incumbent 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 63% 37% Fixed voice Fixed non-voice Mobile 77% 70% 71% % % 28% % % 19% % % 8% % 5% 57% 42% 65% 34% 1% 1% 51% 37% 50% 38% 12% 13% R bn Revenue Source: OVUM, Oanda.com, Delta Partners analysis 1 Includes Transit voice, Wholesale line rental, Pre-selection, etc. Excludes interconnection terminating on the operator network; 2 Includes data connectivity services (WDM, ATM, Frame Relay, Ethernet, etc.), access services (DSL, fibre, etc.), infrastructure (e.g. dark fibre) and VAS (e.g. CDN, hosting, etc.); 3 includes services to MCOs, MVNOs and MVNEs and wholesale mobile-originated voice traffic; 4 ZAR/USD exchange rate: 7 (2011) and 8.5 (2012); 5 based on BT and FT revenue -
35 Fixed and Mobile Penetration 06 Fixed tele density (subs / households) Mobile penetration (subs / population) Wireline 41.8% 39.3% 37.2% 34.7% 32.6% 31.4%30.4%29.4% 28.0% 76.2% 96.2% 87.8% 92.0%94.3% 114.5% 129.1% 138.8% 63.1% 45.9% 43.9% Fixed broadband 0.4% 1.0% 1.8% 3.1% 4.0% 5.5% 6.6% 7.8% 9.0% Mobile Mobile broadband 27.5% 12.8% 0.3% 1.1% 1.9% 2.9% 4.0% Source: Globalcomms Source: GSMA Intelligence 26/06/2014 Mobile market has been growing faster than the fixed line market in both in voice and broadband 35
36 Commercialisation of New Products 06 Telkom Wholesale is expand its connectivity offerings by strengthening its overall propositions with relevant value added services Sold by Telkom WHS Not sold by Telkom WHS Infrastructure Towers co-location Facility co-location Connectivity City to City Intl. Fiber Optic Diginet Ethernet (Metro & Express) SAIX IP Connect Intl. Private Leased Lines Megalines Resell ADSL VPN (layer 2) Bitstream NGA and VULA1 Wholesale Line Rental P2P Ethernet and SDH TDM Interconnect Satellite Giganet (& shared Giganet) VoIP Easy IP ADSL Carrier line sharing Ethernet & SDH carrier Serv Carrier fixed connection Interconnection port IP/ATM Bitstream Access Wholesale Internet Access Bitstream xdsl Leased lines IP Connect P2P Ethernet Satellite VoIP Broadband Voice hubbing Voice Voice Voice Data Center Data Center Data Center VAS Being developed CDN Bulk SMS Managed Security CDN Bulk SMS VOD (VideoRise) CDN Managed network solutions Cloud Services (white label) IPTV3 Cloud Services 36 Source: Operator reports, Operator websites Non-exhaustive
37 2014 END
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